New report discusses annual Homeowner’s ROE outlook
Despite a decreasing return on equity, a new study says that direct US homeowner’s insurance premiums will continue to grow through 2017. The annual Homeowners’ ROE Outlook report, from Aon Benfield takes a snapshot of the US homeowners insurance marketplace using information compiled via statutory financial filing information along with rate filings and actual information take from the top 20 homeowners in each state.
According to this years report, projected premiums in the homeowner’s market are expected to reach $93 billion in 2017, $2 billion more than the $91 billion logged in 2016, and the $89 billion in 2015.
“Given the year-on-year increase in premiums, US homeowners’ insurance can be considered a growth engine within the industry,” explained Greg Heerde, Head of Americas Analytics for Aon Benfield, said. “However, we continue to monitor this line business carefully, as it is difficult to say at this stage whether insurers’ approved rate increases will be sufficient to match their loss and expense inflationary pressures of the future.”
Parr Schoolman, Head of Aon Benfield’s Risk and Capital Strategy team, added: “Using advanced data and analytics, we are continuing to develop tools and services that provide clients with insight, at a granular level, into which homeowners’ risks are most likely to be profitable and are in alignment with their overall capital strategy.”
Other findings from the study
The report found that the average rate increases for the top 20 homeowners insurance companies was three percent during the 18 months leading up to August 2017. Other findings from the study include:
- The highest average rate increase of seven percent being achieved in the states of Texas and North Carolina.
- Meanwhile, Florida insurers achieved an average rate increase of five percent during the period, which will likely be insufficient to maintain their current ROE levels given the increased costs facing the state’s carriers from benefits and claims adjustments.
- Prospective 2017 after-tax return-on-equity (ROE) for US homeowners’ business was 4.5 percent on a countrywide average (2016: 6.7 percent), and 9.1 percent excluding the state of Florida.
- Challenges to the ROE projections include a slowdown in insurers’ rate increases against a backdrop of loss and expense inflation, and an increased A.M. Best capital charge resulting from insurers’ premium and exposure growth – which is currently being offset by reduced reinsurance costs.
For those interested in viewing the entire the 2017 Homeowners’ ROE Outlook report, it can be accessed by clicking on this link: https://aon.io/2017-homeowners-roe-outlook.
Why Agency Checklists thinks that home is becoming the new auto
Why did we put that in the title and what do we mean? For the past few months, Agency Checklists has noticed a shift in focus on the homeowners market. Here are some of the trends that we are noticing:
- Unlike the auto insurance marketplace, the homeowner’s market is more stable with a lot less turnover than in the auto insurance marketplace.
- The increased attention and innovation that is going into the homeowners quote process as seen by the new quoting processes unveiled by Swyfft and Plymouth Rock for example, will allow agents to grow their homeowner’s business.
- Many Mass. agents have already begun focusing their efforts exclusively on the homeowners market to the exclusion of the auto insurance marketplace, and as a result have seen real organic growth for their agencies.
As a “growth engine” for the insurance industry, this report shows that more agents and carriers should be taking a serious look at their homeowners book of business.
